While the 2013 and 2014 budgets are similar in size, the city has $1.4 million less to work with next year.

“For 2014, we had to budget $1.4 million more than we did in 2013 for employee health benefits,” City Administrator Ray Gosack said. “It appears throughout the operating budget. It’s a cost of doing business providing that benefit.”

The 25 percent increase is attributed simply to rising claims costs.

“We self insure,” Gosack said. “For the most part, we’re paying the vast majority of all claims, and the cost of claims is up. We don’t get detailed information on the claims because of (the Health Insurance Portability and Accountability Act), but the third-party administrator has told us one of the areas where they are seeing an increase is in cancer claims.”

The city offers a wellness program for its estimated 900 employees and their families. Adults enrolled in the program pay lower deductibles based on meeting criteria that takes into account body mass index, blood pressure, cholesterol, tobacco use and blood sugar.

“It is voluntary, so no one is forced to participate,” Gosack said. “But if they don’t participate in the wellness program, then they pay more for their coverage, between $147 and $294 more per month.”

Beginning in 2014, city employees who use tobacco products will pay between $80-$160 more a month based on their coverage.

“We began preparing employees for this three to four years ago, letting them know this is the direction we’re moving,” Gosack said. “We offered tobacco cessation programs to help employees stop their tobacco use, knowing we were going to get to this point.”

Had health-care costs not increased, Gosack said, funds could have been available to fill eight vacant positions in the Police Department or for employee pay raises.

“In the last four years including 2014, there’s only been one year where we had pay adjustments for employees,” Gosack said.

A second budget challenge was a decline in sales tax revenues, which carry over from one year to the next. Revenues from the city’s sales taxes were off by about $1.25 million through September. The city expected $30.7 million in revenues, but received $29.5 million. The only month this year that came in above budget estimates was March.

“We overbudgeted it,” Gosack said. “That’s the first time we’ve done that in a long time.”

Sales tax revenues are forecast to be about 1 percent higher in 2014.

Directors will be asked to approve next year’s budget Tuesday during a regular meeting. The draft proposal shows a total budget of $201 million for operations ($110 million) and capital projects ($91 million).

Despite the challenges, Gosack said the budget does feature its share of highlights.

“We still maintain our core services,” he said. “All of our budgets are balanced, and there are no rate, fee or tax increases. There are no layoffs. There is capital infrastructure investment of $91 million, and we deliver on promises made to voters in 2012 in the citywide sales tax election.”